Beijing’s most ambitious attempt yet to prop up China’s slumping real estate market was panned by S&P Global and Fitch Ratings, as the two ratings agencies predict more negative impacts on the crisis-hit sector, in stark contrast to some analysts who think that the worst may be over.
S&P Global on Thursday cut its new home sales forecast for 2024 on concerns that homebuyer confidence will remain weak and demand, especially in lower-tier cities, will not recover sufficiently.
“We expect China’s real estate sector to continue to contract in the second half of 2024 despite the new round of policies, with sales expected to decline 15 percent from last year, a downward adjustment from the expected 5 percent. decline (made) by the end of 2023,” said Renyuan Zhang, director of corporate ratings at S&P Global (China) Ratings.
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House prices in China saw their strongest decline in almost a decade in May, with prices for new homes in 70 cities falling 0.71 percent from April, while prices of used homes also fell 1 percent month-on-month, according to official data.
Residential buildings in Beijing, China, on Wednesday, May 29, 2024. China’s capital Beijing will allow families to buy another home in non-core areas, as the country’s biggest cities buckle under the pressure of a record slump in the real estate sector. Photo: Bloomberg alt=Residential buildings in Beijing, China, on Wednesday, May 29, 2024. China’s capital Beijing will allow families to buy another home in non-core areas, as the country’s biggest cities buckle under the pressure of record real estate real estate decline. Photo: Bloomberg>
Overnight, Fitch Ratings made a similar downgrade. It now expects new home sales to fall by as much as 20 percent to 8.3 trillion yuan ($1.1 trillion) in 2024, while gross floor area sales are expected to fall by 10 to 15 percent to between 800 million and 850 million. square meter range.
“This reflects a lower sales trend in the first four months than our previous forecast of a sales decline of 5 to 10 percent, as well as more pronounced downward pressure on new home prices,” said Tyran Kam, senior director of Asia-Pacific. company ratings at Fitch.
The dismal real estate data came to light even after Beijing unveiled a wide range of measures aimed at tackling problems in the country’s embattled real estate sector, including abolishing mortgage rate floors across the country and earmarking funds for local governments and state-owned enterprises. owned businesses to handle excess housing stock.
New home sales by the country’s top 100 developers fell 33.6 percent year-on-year in May, while overall sales fell 44.3 percent in the first five months of the year compared to the same period last year, although the percentage of total sales The decline has decreased by 2.5 percentage points, according to data collected by China Real Estate Information Corp.
S&P’s Zhang said the sales recovery is beset by challenges on multiple fronts: a continued decline in home prices will weigh on buyer confidence in a market already struggling with more second-hand housing supply, as lower-tier cities in particular continue to dealing with a crisis. inventory stacking.
However, some analysts say Beijing’s latest stimulus package will have a positive impact on property prices in the long term.
“It is extremely positive that the central government has announced that it will buy surplus properties from the market,” said Stefan Hofer, managing director and chief investment strategist at LGT Group in Liechtenstein.
“If you look at the latest data from the People’s Bank of China (PBOC), average house prices in China are still falling, so if the government starts buying up surplus real estate from the market through state-owned enterprises, prices would be in the should stabilize in the second half of 2024.”
“We know from the PBOC’s own statistics that lending to households in China by financial institutions is very low, so people are not borrowing,” Hofer said. “However, if they feel more confident and see house prices rising, confidence will be higher, they will borrow more and the economy will then grow faster again.”
Signs of recovery are visible in other parts of the market.
“A bright spot in China’s real estate sector is secondary housing, where transaction volumes are showing continued signs of improvement, heralding a recovery in house prices and the broader economy,” said Zhang Wenlang, chief macro analyst and managing director at CICC.
Additional reporting by Jiaxing Li
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